Brian Lenihan Jnr (Dublin West, Fianna Fail)

I am grateful to Deputy McHugh for tabling Question No. 7 and thereby allowing me to correct certain matters that were misrepresented in a recent newspaper article. A report on the implications of cross-Border shopping, which I commissioned on foot of a request made by Deputy O'Donnell at a meeting of the Joint Committee on Finance and the Public Service, was published recently. The report establishes that in 2008, the value of cross-Border shopping was between €350 million and €550 million. It estimates that the potential loss in Exchequer revenues as a consequence of cross-Border shopping, taking VAT and excise yields into account, was between €58 million and €90 million in 2008. In addition to the VAT and excise loss, there was a possible corporation tax revenue loss, tentatively estimated at between €15 million and €24 million. It should be noted that all estimates for corporation tax revenue are provisional and should be seen as indicative of the potential loss involved. If the exchange rate remains close to current levels throughout 2009, it is estimated that the volume of cross-Border shopping in 2009 will be worth between €450 and €700 million. It has a remote connection with the VAT rate in this jurisdiction — it primarily relates to the differential price arrangements between the sterling and euro areas. The estimated loss of VAT and excise receipts to the Exchequer resulting from that will be between €72 million and €112 million.

I assure Deputy McHugh that I will examine any proposal that might help to stimulate the economy. Two crucial points should be noted in that context. Differentials in prices between Northern Ireland and this State do not always rate to the tax treatment of those items. Some differentials are rooted in the comparative underlying prices of products in the two jurisdictions. It is important that we address those underlying factors in other ways. It should be noted that the United Kingdom's stimulus package, which involves the reduction of the top rate of VAT in that jurisdiction to 15%, has not succeeded in stimulating the UK economy. It is clear from newspaper reports today that the measure in question has brought the UK into a position of some fiscal exposure. Rather than reversing that country's economic decline, the stimulus package has brought about the depletion of the tax base in the UK.

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